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Inside the CFPB

May 12, 2014

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HFSC Votes to Override Multiple CFPB Rules, Despite Senate Signal

Members of the Senate Banking, Housing and Urban Affairs Committee from each party said there is interest on Capitol Hill in moving technical corrections legislation aimed at the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, housing finance reform legislation comes first, said Sen. Bob Corker, R-TN, and Sen. Heidi Heitkamp, D-ND, in comments to attendees at the Independent Community Bankers Association of America’s recent 2014 Washington policy summit. Neither explained exactly why housing reform is the priority, but one observer speculated that, in football terms, “it’s probably because housing reform is closer to the goal line.” Given the suddenly deteriorating prospects for the leading measure in that regard, the so-called Johnson-Crapo bill, that doesn’t bode well for those... Read More

CFPB Throws Mortgage Industry a QM Bone, Proposes ‘Right to Cure’

The mortgage lending industry caught a break recently when the CFPB proposed a much-sought “right to cure” a mortgage that would otherwise be considered a qualified mortgage under the bureau’s ability-to-repay rule, except for an inadvertent deviation from the 3 percent points-and-fees cap. The points and fees charged to a consumer on a QM loan generally cannot exceed 3 percent of the loan principal, with higher thresholds specified for various categories of loans below $100,000. If a lender believes, in good faith, that it has offered a QM but afterwards discovers that it has exceeded the 3 percent cap, the proposed rule issued by the CFPB lays out limited circumstances under which the excess can be refunded and still have... Read More

SunTrust Bank Referred to Bureau In Dispute Over Online Advertising

In its first government referral, the Online Interest-Based Advertising Accountability Program last week referred SunTrust Bank Inc. to the CFPB after SunTrust allegedly refused to participate in the advertising industry’s self-regulatory process. The Accountability Program said it uses this “cooperative inquiry process” to help companies understand and comply with the cross-industry Self-Regulatory Principles for Online Behavioral Advertising. "As part of its ongoing monitoring and enforcement processes regarding website operators’ duty to provide consumers with transparency and control of OBA,” the Accountability Program said it sent a letter of inquiry to SunTrust after examining the bank’s website and observing “third parties known to be engaged in collecting consumers’ web browsing activity in order to serve them interest-based ads.” Citing the OBA... Read More

Walter in Settlement Talks with CFPB Over Servicing Practices

Officials at Walter Investment Management revealed that the nonbank servicer is in talks with the CFPB and the Federal Trade Commission to settle a potential enforcement action by the federal regulators likely involving Green Tree Servicing LLC, its wholly owned subsidiary. The disclosure was made in the company’s Form 10-Q filing with the Securities and Exchange Commission late last week. Here’s the background: In response to a civil investigative demand from the FTC issued in November 2010 and a CID from the CFPB in September 2012, Green Tree Servicing produced “documents and other information concerning a wide range of its loan servicing operations,” Walter said. On Oct. 7, 2013, the CFPB notified Green Tree Servicing that bureau staff was considering... Read More

ITT Educational Services Seeks Dismissal of Bureau’s Complaint

ITT Educational Services, the target in the CFPB’s first enforcement action against a for-profit education company over allegations of predatory lending, has asked a court to throw out the bureau’s complaint, arguing that the CFPB’s lawsuit is unconstitutional on two key grounds. In its brief in support of its motion to dismiss, filed late last month before the U.S. District Court for the Southern District of Indiana, Indianapolis Division, ITT argues that the CFPB is an unconstitutional entity, first, because it has “no presidential oversight” and because there is “no Congressional control of funding” of the agency.Attorney John Culhane, a partner in the Philadelphia office of the Ballard Spahr law firm, pointed out in a client note about the... Read More

CFPB Fair Lending Report Fails to Respond to Congress’ Questions

The CFPB has released its 2014 Fair Lending Report to Congress but apparently left a few gaping holes when it comes to specifically answering some questions various lawmakers of both major parties have raised with bureau personnel, if industry attorneys are correct in their assessment. In the report, the bureau describes how it works to ensure that consumers have fair, equitable and nondiscriminatory access to credit by its use of research, supervision, enforcement, consumer education and outreach, rulemaking and interagency engagement. Among the tools the CFPB highlighted since the last such report to Congress was its Home Mortgage Disclosure Act Database, which enables the public to study trends in the mortgage market. Going forward, “The CFPB will maintain a sharp... Read More

Bureau Proposes Easing Privacy-Notice Requirements for Lenders

The CFPB last week proposed easing financial institutions’ annual privacy-notice requirement under the Gramm-Leach-Bliley Act by creating an alternative delivery method which financial institutions would be able to use under certain circumstances. Under GLBA, financial institutions are required to provide their customers with initial and annual notices about their privacy policies. If financial institutions share certain customer information with particular types of third parties, the institutions also have to provide notice to their customers and an opportunity to opt out of the sharing. Many financial institutions currently mail printed copies of the annual GLBA privacy notices to their customers, but have expressed concern that this practice causes information overload for consumers and unnecessary expense for the institutions.Under the proposed... Read More

GAO Finds Key Internal Control Deficiencies in Audit of CFPB

The Government Accountability Office identified two significant deficiencies in the CFPB’s internal controls over financial reporting. Specifically, the GAO found that CFPB did not effectively design or implement internal controls over its year-end accrual process to ensure accounts payable amounts recorded were complete and accurate, nor did its controls ensure accurate and complete recording of its property and equipment transactions. “These deficiencies increase the risk that the CFPB may not detect and correct errors in time to prevent misstatement of the financial statements,” the GAO said. The GAO made four new recommendations it said are intended to improve management’s oversight and controls in these areas and reduce the risk of misstatements in the CFPB’s accounts and financial statements. First, the... Read More

Industry Experts Provide Tips on Successful Non-QM Lending

Now that the mortgage lending industry has a few months of experience dealing with the qualified mortgage standard under the CFPB’s ability-to-repay rule, some lenders are getting more confident about lending outside the parameters of the QM. Last week, during a webinar sponsored by Inside Mortgage Finance, an affiliated newsletter, industry experts highlighted some key considerations as to how to do so while minimizing the legal risk and otherwise overcoming certain compliance challenges. “A couple of points that I would make is that you want to document every step along the way – because what you’re really managing to is not necessarily the CFPB, not even necessarily a judge. You’re probably managing to the lawyer who is looking to take the... Read More

SCOTUS Agrees to Review TILA Rescission Rights

The U.S. Supreme Court has agreed to resolve a split among the circuit courts over a provision in the Truth in Lending Act that allows a borrower to void a mortgage loan. In reviewing the case, Jesinoski v. Countrywide Home Loans, the SCOTUS will consider whether a borrower may file a lawsuit for rescission after TILA’s three-year repose period if the borrower sent a notice to the lender within that period. The U.S. Court of Appeals for the Eighth Circuit in September upheld a lower court ruling that a borrower seeking to rescind a mortgage loan under TILA must file suit within three years of consummating the loan. Contrary to the plaintiffs’ assertion, the lower court ruled that a borrower’s... Read More

Bureau’s Debt-Collection Survey Probably Will Fall Short, ABA Says

The members of one lender trade group support the CFPB’s proposed survey of consumer experiences with debt collection, but think the bureau is likely going to miss a good opportunity to obtain useful data that can be relied on for policymaking.“Considering the range of issues presented and the fact that the bureau’s policy choices will be felt across the U.S. economy, it is critical that the bureau develop a complete and robust factual record to inform its policy choices,” said Virginia O’Neill, assistant chief compliance counsel for the American Bankers Association, in a recent comment letter to the CFPB. As the ABA sees it, a carefully designed and executed consumer survey can be one valuable element of such a... Read More

CFPB Can Monitor Compliance With Foreclosure Settlements

A new study from the Government Accountability Office has confirmed that the CFPB can monitor banks for their mortgage servicing compliance with the terms of settlements that were reached before the bureau received its full authorities with the appointment of a confirmed director. The degree to which the CFPB has actively done so, however, appears to be limited. The GAO study at issue concerned the consent orders the Office of the Comptroller of the Currency and the Federal Reserve reached with 16 mortgage servicers back in 2011 and 2012. Those agreements required the servicers to hire consultants to review foreclosure files for errors and to remediate harm to borrowers. The CFPB was established on July 21, 2011, and the first... Read More

Worth Noting/What We’re Hearing/Looking Ahead/Key Dates to Watch/This-n-That

FSOC Suggests State Regulators Work With CFPB on Nonbank Servicer Issues. The Financial Stability Oversight Council – of which the CFPB is a member – recommended last week that state regulators collaborate on prudential and corporate governance standards to strengthen nonbank servicers. The FSOC said state regulators should work on the standards with the CFPB and the Federal Housing Finance Agency when appropriate. The CFPB and state regulators have some authority over these companies, FSOC noted, but many of them are not currently subject to prudential standards such as capital, liquidity or risk management oversight. Additionally, in a number of cases, mortgage investors’ ability to collect on mortgages is dependent on a single mortgage servicing company, where failure could have significant negative... Read More

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